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Investor in low-cost carriers seen as likely buyer of Frontier Airlines

PHILADELPHIA - Frontier Airlines may soon be sold to a private-equity firm in Phoenix that wants to turn Denver's hometown airline into an ultra-low-fare carrier, comparable to Spirit Airlines and Allegiant Air.

Republic Airways Holdings, which owns Frontier, told investors on an earnings call July 26 that it has signed a nonbinding agreement with an unnamed buyer. While several conditions must be resolved, the deal is expected to close by late September, Republic chief executive officer Bryan Bedford said.

Republic postponed its annual shareholder meeting until Sept. 17.

Indigo Partners L.L.C., a Phoenix firm that invests in low-cost airlines around the world, including Spirit, Singapore-based Tiger Airways, and Hungary's Wizz Air, is reportedly the potential buyer.

Indigo managing partner William "Bill" Franke has said he has perceived a U.S. market for a third ultra-low-fare carrier, in addition to Spirit in Miramar, Fla., and Allegiant, whose parent, Allegiant Travel Co., has its headquarters in Las Vegas.

An Indigo spokeswoman said the company could not comment.

"The timing is not appropriate," she said.

Frontier's strategy is much like Spirit's and Allegiant's. They use a mix of smaller secondary airports, where landing fees are lower, but are close to large metropolitan areas and some major airports.

Spirit, for example, flies out of both Atlantic City, N.J., and Philadelphia International Airports.

Ultra-low-cost carriers fly reduced schedules compared with major airlines. By operating routes two or three times a week, instead of daily, fewer crews are required, planes are full, and aircraft maintenance is spread over longer periods of time. Their focus is on leisure travelers.

"My expectation is that any potential new owner would continue the secondary-airports strategy," said Stephen Williams, director of Wilmington New Castle and four other small airports operated by the Delaware River and Bay Authority.

Since Frontier began flying from Wilmington on July 1, the 168-seat Airbus 320 planes have been 90 percent full to Chicago-Midway, Denver, Houston, Orlando, and Tampa, Fla., Williams said.

"It is going very, very well."

While Spirit and Allegiant offer low base fares, they charge for everything on the flight - from soft drinks to carry-on bags in the overhead bin.

Frontier began charging this week for carry-on bags, if tickets were purchased on third-party travel websites, such as Orbitz and Expedia. Carry-on luggage is still free for trips booked on Frontier's website, flyfrontier.com.

Indigo sold its interest in Spirit last week, divesting itself of 12 million shares of Spirit stock.

Franke and another Indigo partner, John Wilson, also resigned from Spirit's board of directors. The reason is, presumably, that Indigo will soon own a low-cost competitor, Frontier, and will battle for U.S. travelers.

Republic Airways has been trying to sell Frontier for more than a year. Republic owns Chautauqua Airlines and flies under major airline brands, including US Airways Express, American, United, and Delta Connection.

Frontier's departure from the Colorado Springs Airport in April has contributed to a dramatic drop in passenger traffic. Mayor Steve Bach and other city officials are undertaking measures to try to turn the airport's fortunes around.